The Cyprus Crisis – When Extra-Legal Unelected Technocrats with Connections Run Things

by Bob Adelmann


The wealthy really are different from the rest of us.

They have money and they have connections. With those connections they are able to keep their money. The rest of us? Not so much.

With the imposition of the Eurogroup’s mandates come the inevitable capital controls. Anyone with a brain and an account at either the Bank of Cyprus or the Waiki bank (scheduled to disappear) is lining up at those banks as we write these words (it’s 3:45PM in Nicosia) and the banks were to open at noon. It’s called a run.  In a fractional reserve banking system, there is never enough cash on hand to meet even a minor increase in demand by customers for their money. It’s been loaned out. Sorry about that. So the limits are less than $400 a day, turning the banks essentially into ATM machines. And savings accounts and so-called “time deposits” which are supposed to mature at some point in the future, won’t. They’ll be called “eternal deposits.”

But I digress.

The big money boys have already moved their money out of the banks.

There are “special payments” loopholes in those capital controls designed to keep the money in the banks where it belongs. There are branches of both banks in Russia and the City of London (a one square mile in the center of London in which major international financial institutions have a presence) that are outside of Cyprus’ control. As noted elsewhere, Cyprus President Anastasiades told his close friends days before the mandate came down to get their money out while the getting was good. They did.

And now the Cyprus parliament is investigating those withdrawals, while Anastasiasdes is trying to pin the blame on Cyprus’ central bank (yes, tiny little Cyprus has a central bank!) president Panicos Demetriades. It’s really something to watch. Here’s this from Spiegel online:

The central bank head has been harshly criticized due to suspicious capital flight from Laiki and the Bank of Cyprus, the two institutions that have been hit hardest by the Cypriot banking crisis. There are indications that large sums flowed out of the two banks just before the first bailout package was signed in the early morning hours of March 16.

At the end of January, some 40 percent of all savings held in Cypriot accounts were on the books of those two banks. Since then, however, much of it has been transferred elsewhere, despite orders from the central bank that accounts at the two institutions be frozen…

Much of the money was withdrawn from overseas, where Cyprus had no authority. Branches of Cypriot banks in non-euro-zone countries such as Russia and Britain do not answer to the European Central Bank.

Meanwhile back in the ATM line:

Cypriots have taken to the streets of Nicosia in their thousands to protest against a bailout deal they fear will push their country into an economic slump and cost many their jobs…

On Tuesday, up to 3,000 high school students protested at parliament, in the first major expression of popular anger since the bailout was agreed to in the early hours of Monday morning in Brussels. The deal largely side-stepped parliament, and has triggered opposition calls for a referendum.

“They’ve just got rid of all our dreams,” said one student, named Thomas.

This is how life is lived in a country now run by extra-legal unelected technocrats with connections.


A graduate of Cornell University and a former investment advisor, Bob is a regular contributor to The New American magazine and blogs frequently at, primarily on economics and politics. He can be reached at

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